Covid exposes bad governance

The Covid pandemic has put a spotlight on the ability of governments and public administrations to handle a major crisis. However, Covid is not just a health crisis. Because it requires a systematic analysis of the trade-offs between the needs to save lives, the resource limits of the health care system and the need for people to have jobs and the desire to keep the economy alive, it touches on several crucial factors:

Good governance. 

Political leaders have to balance the requirements of the economy with those of the health care system and public health. These requirements are often contradictory so that political leaders have to be able to process contradictory goals and information fast. They have to be able to listen to different voices on the table and form a consensus amongst all parties that can then be communicated to the public. 

It is no surprise to me that governments led by female politicians (Germany, New Zealand, Taiwan) tend to do better in such situations. Just like in corporate board rooms where evidence is mounting that higher gender diversity leads to better decisions on the company level, so too does higher diversity lead to better decisions on the country level. Female leaders typically don’t have to play heroes and don’t have to follow some ideal of a lonely leader taking his decisions while the rest of the world has to follow his lead. Developed countries with these kinds of leaders tended to do worse in the pandemic than countries with more collaborative leaders.

What also helps is previous expertise with complex subject matters. Japan’s government had to deal with SARS in 2003 and knew how to deal with such a pandemic. European and North American countries were less fortunate in that respect.

Covid infections per million citizens

Source: European CDC. 

Trust in the process

Once decisions are taken, there is no time for dithering and half-baked implementation. Decisions have to be communicated clearly to the public and the entire public system has to work towards implementing these. In the United States, as well as in the UK and in other countries the political leadership was inconsistent in its communication and policies and made several fatal U-turns that reduced the public confidence in the country’s leadership and thus undermined the public adherence to government rules.

Be flexible where needed

A rigid process alone won’t help deal with a rapidly evolving situation such as this crisis. If the facts change, recommendations have to change as well and public policy must adjust. Also, if one is dealing with a severe shortage of medical equipment, people, and drugs, then red tape must be cut to fight the emergency. Countries like Germany, Japan, and Australia were much better in this respect than others.

Solid technology infrastructure

The lockdowns have exposed which countries have a good IT and communication infrastructure and which countries don’t. Even more, they have exposed which countries can quickly roll out vital technology solutions like tracking apps and which countries are mired by inadequate infrastructure, inept leadership, and irrational fear of privacy violations.

Lessons for globalisation and outsourcing

Global supply chains and globalisation has been put to a test by the pandemic and some people think that offshoring of production facilities to countries like China will likely be reversed in coming years. As I have said before, I am, not so sure about that. But if a business thanks about offshoring and planning for new investments in low cost countries, the way the country has coped with the pandemic can provide vital clues what to expect from public officials when dealing with applications for new factories and businesses. 

• Is the political leadership going to decide quickly and can foreign investors rely on these decisions to hold or is the political leadership going to hang you out to dry when it becomes inconvenient for them?

• Is the public administration able to cope with complex demands and fast to implement decisions?

• Is the public administration able and willing to cut red tape if there are good reasons for it?

• Is the infrastructure modern and reliable enough to provide a good foundation for the challenges of the 21st century?

When it comes to offshoring low-cost production, businesses have a choice between several countries. The countries in the chart below all have similar wealth and are in a similar stage of economic development. Yet, due to differences in governance and political climate, they made very different experiences during the crisis. Countries like Brazil and Russia have failed the test. Meanwhile, China did extremely well in comparison to some of its competitors, but so did Thailand and Vietnam, two countries that are essentially invisible on the chart below.

Low-cost offshoring countries and the pandemic

Source: European CDC.

Meanwhile, more and more high-tech businesses are outsourcing their production to China and India. Besides a sufficient supply of qualified labour, their businesses are particularly reliant on good infrastructure and solid governance. When we compare different offshoring centres for high-tech products and services it becomes clear that South Korea and Taiwan have a very good case to make to become the recipient of foreign direct investments. Eastern European countries, on the other hand…

High-tech offshoring countries and the pandemic

Source: European CDC.